Tech Ushers in the ‘New Normal’

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With sports cancellations, office closures, and stay at home orders, consumers and businesses are seeking out ways to stay connected. From virtual concerts in video games like Fortnite to the rapid adoption of remote work software tools like Zoom, Slack, and Box, tech is leading society’s transformation to a new normal driven by esports (gaming), cloud computing, collaboration software, mobility, and cybersecurity. See our takeaways on how tech management is responding to change below:

Sports fans turn to simulated sports, Madden, FIFA, etc. to get their sports-fill and are playing in fantasy leagues within these simulated sports.

Esports broadcast hours are at an all-time high, EA’s TV broadcast hours in the US in April was “30% bigger than all of the calendar year 2019”.

Now, management teams are saying esports has evolved from a fad to the mainstream, as gen z and millennials build deeper relationships and stickiness with gaming.

In April, Twitch saw record viewership, with more than 2,400,000 concurrent average viewers, and hours watched climbed to more than a billion hours.

Electronic Arts Q4 2020 Earnings call (5/09)

“I would tell you that FIFA hours watched in April were up 135% over last April and are up 115% for Madden. Our esports TV broadcast hours in the U.S. in April were up 250% over last year, and April alone was 30% bigger than all of calendar year 2019. So we're seeing tremendous engagement in the unbelievable creativity and innovation that our teams are delivering.”

DraftKings Q1 2020 Earnings call (5/15)

“I think eSports is a notable standout. We launched CS:GO and several others and it has been really strong volume compared to what eSports traditionally had seen. And the other thing I had mentioned are the simulated sports, particularly the simulated games that are using Madden -- EA's Madden that people are playing fantasy and such with. And to me, it kind of makes sense, right, that there is a lot of football fans that want football year-round. And it's probably even enhanced by the fact that there is not a lot of other sports on TV and there is a lot of people that are at home with -- looking to watch things. So I think that that's something we are keeping an eye on and there could be some potential to extend the NFL season really throughout the year through simulated sports.

Activision Blizzard Q1 2020 Earnings call (5/05)

“In the face of unprecedented circumstances, our extraordinary teams also delivered extremely strong first quarter financial results. We significantly exceeded our outlook for both revenue and earnings per share. We reached new heights for first quarter net bookings across each of mobile, console and PC, and we exited the quarter with accelerating engagement and momentum across the business as people around the world turn to our content for entertainment and connection.”

Super League Gaming Q1 2020 Earnings call (5/14)

“The trend had already crossed from fad to mainstream and permanent as gaming is the dominant form of entertainment for Gen Zs and millennials. So what did COVID do? It validated gaming and esports and is accelerating the growth and deepening gamer engagement and stickiness. And for us, it started to create meaningful critical mass on our platform. So to recap, through April 2020: registered users, 1.6 million, up over 60% year-to-date. Engagement hours, 16 million engagement hours compared to 15 million for the full year 2019. And viewer impressions, 225 million in the first 4 months of the year compared to 120 million for all of 2019.”

Logitech Q4 2020 Earnings call (5/12)

“eSports, whether it's Fortnite or e-racing tournaments, had record viewership as real live sports have been replaced by virtual sports for now. Such as NASCAR turning to virtual e-racing. Twitch set record highs in viewership, while Microsoft saw all-time record engagements for Xbox Live. Traditional sports will return, but the rise of eSports will continue to happen, perhaps even faster than I originally envisioned.”

Cloud computing

Remote work is accelerating the adoption of cloud computing for businesses, which now require more compute and storage than before.

In particular, COVID-19 has provided tailwinds for strong demand for mobile cloud computing, as societies shelter in place.

Intel Annual Shareholders Meeting (5/14)

“The tailwinds most evident in the first half of the year are on strong demand for mobile compute and related infrastructure on the dynamics of sheltering in place, in particular, mobile PCs, cloud and network infrastructure for 5G remain above seasonal trends.”

Seagate Technology Q3 2020 Earnings call (4/23)

“The start of fiscal year 2020, we shared an expectation for our mass capacity storage shipments to be well above the long-term compound annual growth rate of 35% to 40%. We still expect to exceed that range for the fiscal year as well as calendar year 2020. Increasing demand for data is fueling long-term secular growth for mass capacity storage. I shared examples today that suggest an even greater reliance on data in this new remote economy brought on by the pandemic and likewise, a greater need for compute and storage in the cloud and at the edge.”

ASM International NV Q1 2020 Earnings call (4/22)

“Today, demonstrated by the work-from-home economy, new, more powerful and power-efficient semiconductor devices will be essential in the development and growth of new end market applications, such as in cloud computing, cloud computing artificial intelligence and autonomous driving. For our customers to stay on Moore's Law, a growing number of process steps will require ALD and epitaxy deposition.”

Collaboration software

Both Slack and Microsoft Teams see massive spikes in adoption, further accelerating the battle for workplace chat market share between Slack and Microsoft.

Dropbox sees record demand for Dropbox business; trials are up by 40%; and, engagement is up with product.

Slack Q4 2020 Earnings call (3/12)

“We are seeing at the top of the funnel new team creation spikes pretty dramatically, and that's very strongly correlated with the countries that are in the headlines. So we have a pretty good idea of what's causing that. That takes a while to filter, though, because we've always had a free product. We've always had unlimited trials. It takes a while to get up and running, if successful, it takes a while after that before they'd be campaigned. So very difficult to forecast. I wouldn't -- we haven't been using the word conservatism inside. We've been using the word prudence.”

Microsoft JPMorgan TMT Conference (5/14)

“When I actually think about what sort of this means and sort of how we're thinking about it, especially in a post-COVID world, there's sort of multiple phases to the COVID-19 challenges and that recovery is going to see a lot of these digital transformations. The obviously -- the obvious short term is just business continuity. We are seeing sort of an uptake in all sort of remote-based experiences and services and solutions. Some obvious ones, Teams seen sort of huge spike, Windows Virtual Desktop, has seen a huge spike.”

Cisco Q3 2020 Earnings call (5/13)

“We take a security-first approach to remote working and provide highly secure cloud-based collaboration solutions with integrated end-to-end encryption while protecting our customers' privacy. Throughout the quarter, we invested in scaling our platform at an unparalleled speed to deliver a highly secure, consistent experience and ensuring business continuity for our customers. We are now running our Webex platform at 3x the capacity we were running at in February to manage the dramatic increase in usage growth. We had well over 500 million meeting participants, generating 25 billion meeting minutes in April, more than triple the volume in February.”

Dropbox JPMorgan TMT Conference (5/13)

“But we've certainly seen favorable trends like record demand for Dropbox business. So trials for Dropbox Business are up 40%. And engagement is up. And so a lot of leading indicators we pay attention to are positive. And -- but that said, I mean, I think a lot of the impact -- the negative impact took COVID on our customers in the broader world is yet to be seen.”

Mobility

Activities like e-learning, telehealth, and video conferencing at home are contributing to hundreds to thousands of percent of growth for network usage for major carriers T-Mobile and Verizon.

Carriers say they have not experienced significant latency, and networks are still performing incredibly well.

T-Mobile US JPMorgan TMT Conference (5/12)

“We've seen material increases in usage. I mean things like messaging were 50%, 70%; higher education tools, hundreds and hundreds of percent in growth. So we've seen the nation really take up usage in the home environment, which is primarily where we've seen our activity. Mobility is -- kind of created on the network, to be honest, is starting to come back now. But we've seen incredible usage, and the networks performed incredibly well.”

Verizon Communications JPMorgan TMT Conference (5/12)

“ But there's going to be other areas -- I mean, we have 1,200% growth in the network when it comes to collaboration tools. So of course, it requires a lot more VPNs or safe tunnels, devices for homework, and that's going to be there for a while. We see much more demand for e-learning and home schooling, which requires technology. The telehealth and telemedicine is also something that's increasing and will be there to stay. “

Cybersecurity

Cybersecurity threats evolve amidst COVID-19, now, threat actors are using COVID-19 to lure people in, and the new work from home environment makes it even easier to steal corporate data.

Companies are strengthening their cybersecurity programs to prevent cyber threats from penetrating their new remote workforces.

Proofpoint Q1 2020 Earnings call (5/07)

“Overall, the threat landscape remains quite active with threat actors exploiting the fear and uncertainty in the current environment by targeting unwitting users through the use of COVID-19 lures and other similar tactics to steal logging credentials, compromise users and gain access to other sensitive corporate data in these uncertain times. In fact, current work-from-home requirements, in many cases, serve to further amplify the need for Proofpoint's people-centric security and compliance solutions as employees are accessing and interacting with sensitive corporate data in cloud venues from home networks, and hence, by definition, are not operating on corporate networks where they have the traditional protections.”

Cisco Q3 2020 Earnings call (5/13)

“Moving on to Security, which is always at the heart of everything we do. In Q3, we saw solid growth, reflecting increased demand for our robust solutions to secure the rapid growth in remote workers and their devices. Being the largest enterprise security company in the world, we are uniquely positioned to safeguard our customers wherever they work. We have the most comprehensive and integrated end-to-end portfolio in the industry across the network, cloud, applications and end points.”

Check Point Software Q1 2020 Earnings call (4/27)

“In the cloud space, we continue to see a good momentum, almost doubling our contract value from that business comparing to last year. We're starting to see a nice pipeline of deals that are based on the understanding of the mission-critical nature of the cloud and the security needs that are coming with that.”

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